Capital Southwest Corporation

Capital Southwest priced a public offering of $350 million in aggregate principal amount of notes due 2031. The notes carry a 6.750% annual coupon rate payable semi-annually and were issued at 98.985% of par to yield 6.994% at maturity. Net proceeds will initially be used to repay a portion of the outstanding debt under the company's senior secured revolving credit facility, and the company intends to later re-borrow under that facility to fund new middle-market investments and cover general corporate expenses. The transaction is scheduled to close on September 15, 2026.

Capital Southwest Corporation amended its senior secured credit facility on September 2, increasing committed capacity to $595 million from $510 million and reducing the applicable spread over SOFR to 2.00% from 2.15%, while also removing the separate SOFR adjustment. The unused commitment fees were lowered to a range of 0.50% to 0.75% from 0.50% to 1.00%, and the revolving period and final maturity were extended to September 2030 and September 2031, respectively. The company had $280 million outstanding under the facility as of June 30, implying annual interest savings of about $420,000 from the spread reduction alone, and it holds approximately $2.2 billion in investments at fair value, with a weighted average yield on debt investments of 10.9%. However, the regulatory debt-to-equity ratio stood at 0.91 to 1, nonaccrual investments had a cost of $65.7 million representing 2.9% of the portfolio, and net asset value per share declined to $16.61 from $16.69 in the latest quarter. The $1 billion accordion remains uncommitted, so expansion beyond $595 million depends on lender participation, and the facility includes covenants such as minimum asset coverage of 150% and interest coverage of at least 2.00 times.

Capital Southwest reported pre-tax net investment income of $35 million, or $0.57 per share, for the first quarter of fiscal 2027, as total investment income rose to $61 million. The board declared a regular monthly dividend totaling $0.58 per share plus a $0.06 supplemental dividend. The company expanded its portfolio through $222 million of new commitments across 27 companies, lifting its on-balance-sheet credit portfolio to $2 billion, up 24% from June 2025. Credit quality remained stable, with 99% of the portfolio in first-lien senior secured investments and non-accruals at 1.1% of fair value. Capital Southwest maintained solid liquidity, ending the quarter with about $375 million of cash and undrawn credit capacity versus $312 million of unfunded commitments, and management projected $250 million to $300 million of additional originations over the next 60 days.